Promote Universal Housing Affordability Over Luxury Apartments in Newark NJ
Cranes, a key feature highlighted in Newark’s 2014 municipal campaign, were touted as physical representations of much needed change in the Central Ward. They were exciting harbingers of a new, empowered city that held a captivating magic and mystery of what would follow. In the nation’s largest cities, these cranes brought luxury apartments. Data collected from RealPage, saw that luxury apartments were between 75–80% of this development in major cities. Newark was no exception. The city’s swift response to the housing affordability shortage came in the landmark legislation known as the ‘Inclusionary Zoning Ordinance’.
The ‘Inclusionary Zoning Ordinance’ (IZO), passed in late 2018, seeks to address the national housing shortage by mandating that developments with 30 units or more set aside 20% of those units for affordable housing. The ordinance is based on Newark’s Area Median Income (AMI). Newark’s average household income is approximately $35,000 a year (Census.gov). The IZO is split into three categories: A quarter of the affordable units are for those making less than 40% of the AMI, another quarter are for those making less than 60%, and half are for those making less than 80% (newark.legistar.com). Exemptions include mixed-use developments of 30 or more units, substantially rehabilitated developments over 40 units that have at least 21% affordable units prior, and developments that were “shovel ready” by Jan 1, 2018.
For developers who wish to opt out of providing much needed affordable housing under the IZO, they would have to pay: $50,000 per unit set aside for those making 40% AMI, $20,000 per unit set aside for those making 60% AMI, and $15,000 per unit set aside for those making 80% AMI. The question then becomes whether a developer seeking to build 30 luxury units starting at $1900 per month would be willing to pay $150,000 to keep the average Newark resident out. This fee may be reduced if the development is a construction of retail space within specific neighborhoods or a rehabilitation of residential homes in a specific neighborhood. Either way, any money paid would go to the newly formed Housing Trust Fund, run by the city, which will explicitly go towards building affordable housing.
In an article written by Diana Olick published by CNBC, Chief Economist Greg Willet of RealPage explains the situation: “It’s really tough to deliver product at those lower price points. The cost of land, the cost of building materials, the cost of labor. It’s really about the same regardless of what product you’re doing and it’s just tough to make a deal work financially if you’re going toward that middle-market price”. Toby Bozzuto, president and CEO of The Bozzuto Group, further explains that in their portfolio “which represents 70,000 units mostly in the luxury space, we’re seeing that our renters are spending a relatively low amount of their income on rent despite rents being perceptively high”. In short, it does not make financial sense for developers to provide housing that is affordable to people even if those projects are located in a city with a high demand for affordability, like Newark. What’s worse is that there are enough people willing to pay exorbitant prices, because it’s affordable for them. Some luxury apartments, like Newark’s Historic Walker House, rather remain vacant than house the average Newark resident. It was only in December that the apartment finally broke 50% occupancy. Apartments.com currently lists the starting price of their studio at $1823 a month. For those of us can’t afford that, we can simply go around the corner to 23 Fulton St and pay $1650 a month for a 1 bedroom at 553 sq. ft.
The mass, unchecked proliferation of luxury apartments in the Central Ward and throughout Newark isn’t the root of the problem. After all, every economist, every developer, every property owner is only arguing in their best economic interests — and who among us can fault anyone for doing that? But then, who will argue for the grandmother that’s struggling to find a place for her and her grandchild? Or the entry level administrative aide that makes too much for assistance and too little to afford the $1900 per month studio? Who will stand for the 80% of Newark residents who rent and the 60% of Newark residents who are cost burdened?
Fortunately for developers, most cities are designed to cater to their demands and will jump at the opportunity to give tax incentive after tax incentive to their projects. They will eagerly listen to developer concerns while at the same time try to quell any chance of community outrage by implicitly telling folks that there either isn’t anything more they can do, or what little that has been done is the most anyone can hope for. In lieu of genuine legislator outrage, this all effectively translates to an acquiescence of legal price gouging — which is why even ordinances touted as being wildly progressive are careful to ensure exemptions and loopholes.
What if the Newark City Council instituted a ban on luxury housing? Consider the cost of such a proclamation against the harsh reality of unaffordable housing sitting across from slightly more unaffordable housing. What if the Council identified highly sought-after areas throughout the city and made them 100% affordable? They could call them “Universal Housing Affordability Zones”, honor the same affordability metric of HUD and explain to developers the need for affordability. If they refuse, which is likely, simply demand it and leave no room for exemptions or reductions. Would the number of affordable housing in Newark decrease by any significant measure? A small meal is better than no meal at all, but at the end of the day you are still starving. Cities were built for their residents to do more than subsist, survive, or just make it. Cities were built for communities to flourish.
It may be impossible to objectively prove whether or not these tepid responses to the national affordable housing shortage are good faith efforts written by staunchly policy driven politicians rifling through an array of bold international strategies and twisting themselves tirelessly to make systemic change within a frustrating framework geared towards the wealthy. But even if that was the case, it does not change the fact that people live in the here and now and have the right to demand affordability. What is clear, in Newark and cities across the nation, is that this housing affordability shortage is not the fault of draconian government regulations or the cost of development, but rather the fact that developers, by in large, are thoroughly uninterested in building housing that is affordable.
Change will not come without bold policies and a fierce commitment, by those we elect, to speak for and fight for the 80% of our community who rent and the 60% of Newark residents, homeowners and renters alike, who are struggling to do so. Together we can build the political will to advance sensible housing and economic policy so that Newark can fulfill its promise of being a city for all.
